AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
TABLE OF CONTENTS
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Cash Flow 4
Condensed Consolidated Notes to Financial Statements 5
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2006
ASSETS
Current Assets
Cash and cash equivalents $ 211,448
Accounts receivable, net 1,796,035
Other receivables 105,014
Loan receivable from officer 2,992,366
Deferred tax asset 125,494
Advances 31,081
Other current assets 1,177
Prepaid expenses 167,631
-----------
Total Current Assets 5,430,246
-----------
Property, Plant & Equipment, net 140,174
-----------
Other Assets
Deposits 8,090
-----------
Total Assets $ 5,578,510
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 170,314
Provision for income tax 783,620
Deferred tax liabilities 32,050
Dividends payable 3,022,833
Current portion of lease obligations 41,176
-----------
Total Current Liabilities 4,049,994
Lease obligation 33,750
-----------
Total Liabilities 4,083,744
-----------
Minority interest 88,881
-----------
Stockholder's Equity
Common stock, $680.75 par value, 100,000,000 shares
authorized, 100 issued and outstanding 68,075
Additional paid in capital (92,130)
Dividend payable (3,022,833)
Other comprehensive income 60,461
Retained earnings 4,392,312
-----------
Total Stockholder's Equity 1,405,885
-----------
Total Liabilities and Stockholder's Equity $ 5,578,510
===========
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
Net Revenue $ 2,210,775
Cost of sales 425,957
-----------
Gross profit 1,784,819
Operating expenses
General and administrative expenses 55,130
-----------
Income from operations 1,729,688
-----------
Other (Income) Expense
Interest income (57)
Interest expense 3,659
Currency exchange losses 360
Minority interest 22,698
Gain on disposal of asset (1,030)
-----------
Total Other (Income) Expense 25,630
-----------
Income before income taxes 1,704,058
Provision for income taxes 591,838
-----------
Net income 1,112,220
Other Comprehensive income
Foreign Currency Translation 60,461
-----------
Comprehensive Income $ 1,172,681
===========
Basic & diluted net income per share $ 11,122
===========
Weighted average shares of share capital outstanding
- basic & diluted 100
===========
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,112,220
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest 22,698
Loss on sales of fixed assets (1,030)
Depreciation 10,712
(Increase) / decrease in assets:
Accounts receivable (1,584,886)
Other receivables, deposits and prepaid expenses (170,636)
Increase / (decrease) in liabilities:
Accounts payable and accrued expenses 26,226
Provision for income tax 591,838
-----------
Net cash provided by operations 7,143
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of property & equipment 11,634
Acquisition of property & equipment --
-----------
Net cash provided by investing activities 11,634
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Receivable from related parties 163,097
Payment on capital lease (21,768)
-----------
Net cash provided by financing activities 141,329
-----------
Effect of exchange rate changes on cash and cash equivalents 512
-----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 160,619
CASH AND CASH EQUIVALENTS, BEGINNING BALANCE 50,830
-----------
CASH AND CASH EQUIVALENTS, ENDING BALANCE $ 211,448
===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the three months for:
Interest paid $ 3,659
===========
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note A - ORGANIZATION
Averox FZ-LLC ("Averox Dubai") a free zone limited liability company
organized under the Laws of Dubai, UAZ was incorporated on November 9,
2004. Averox Consulting (Private) Limited ("Averox Pakistan"), a private
limited company organized under the laws of Pakistan on March 19, 2003.
When used in these notes, the terms "Company," "we," "our," or "us" mean
Averox Dubai and its consolidated subsidiary Averox Pakistan.
On August 31, 2006 the Company's shareholders transferred 98 shares of
common stock in Averox Consulting (PVT), Ltd. ("Averox Pakistan"), a
Pakistan registered entity, to Averox Consulting FZ-LLC ("Averox Dubai").
These shares represent ninety eight percent (98%) of the issued and
outstanding shares on that date. Averox Pakistan became a majority owned
subsidiary of Averox Dubai.
The principle services we provide include the design, deployment,
integration, and the overall management of telecommunications networks for
both large and small companies. Our work for telecommunication companies
involves software development, radio frequency engineering, project
management and the installation of telecommunications equipment. We also
provide network management services, which involve day-to-day optimization
and maintenance of telecommunications networks. To date, most of our
network engineering and deployment services have been for
telecommunications carriers primarily in Pakistan, although we are
actively marketing our services and solutions in Eastern Europe, the
Middle East and the rest of Asia.
Our information technology, or IT, professionals develop and promote
software which delivers industry standard-specific solutions. The
solutions developed by our IT professionals address needs in a wide
spectrum of areas such as e-commerce, enterprise resource planning, IT
strategy and consulting, project management and web-based applications
such as content management systems, and Internet and intranet applications
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of Averox Dubai
and its majority owned subsidiary Averox Pakistan, collectively referred
to within as the Company. All material intercompany accounts, transactions
and profits have been eliminated in consolidation.
Exchange Gain (Loss):
During the three months ended September 30, 2006, the transactions of
Averox Pakistan were denominated in foreign currency and were recorded in
Pakistan Rupee (PKR) at the rates of exchange in effect when the
transactions occur. Exchange gains and losses are recognized for the
different foreign exchange rates applied when the foreign currency assets
and liabilities are settled.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Translation Adjustment
As of September 30, 2006, the accounts of Averox Pakistan were maintained,
and its financial statements were expressed, in Pakistan Rupee (PKR). Such
financial statements were translated into U.S. Dollars (USD) in accordance
with Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign
Currency Translation," with the PKR as the functional currency. According
to the Statement, all assets and liabilities were translated at the
current exchange rate, stockholders' equity (deficit) is translated at the
historical rates and income statement items are translated at the average
exchange rate for the period. The resulting translation adjustments are
reported under other comprehensive income in accordance with SFAS No. 130,
"Reporting Comprehensive Income" as a component of shareholders' equity
(deficit).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Risks and Uncertainties
The Company is subject to substantial risks from, among other things,
intense competition associated with the industry in general, other risks
associated with financing, liquidity requirements, rapidly changing
customer requirements, limited operating history, foreign currency
exchange rates and the volatility of public markets.
Contingencies
Certain conditions may exist as of the date the financial statements are
issued, which may result in a loss to the Company but which will only be
resolved when one or more future events occur or fail to occur. Our
management and legal counsel assess such contingent liabilities, and such
assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the
Company or unasserted claims that may result in such proceedings, the
Company's legal counsel evaluates the perceived merits of any legal
proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought.
If the assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the Company's
financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or
is probable but cannot be estimated, then the nature of the contingent
liability, together with an estimate of the range of possible loss if
determinable and material would be disclosed.
Loss contingencies considered to be remote by management are generally not
disclosed unless they involve guarantees, in which case the guarantee
would be disclosed.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time deposits,
certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Accounts Receivable
We maintain reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Reserves are recorded primarily
on a specific identification basis. As of September 30, 2006, there were
approximately $1,245,595 in reserves made for allowance for doubtful
accounts.
Property, Plant & Equipment
Property and equipment are stated at cost. Expenditures for maintenance
and repairs are charged to earnings as incurred; additions, renewals and
betterments are capitalized. When property and equipment are retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the respective accounts, and any gain or loss is included in
operations. Depreciation of property and equipment is provided using the
straight-line method for substantially all assets with estimated lives of:
Equipment 3 -5 years
Furniture & Fixtures 5 - 10 years
Motor Vehicles 5 years
As of September 30, 2006 property, plant and equipment consisted of the
following:
9/30/2006
Furniture & Fixtures 37,115
Office equipment 61,380
Motor vehicles 127,980
---------
226,476
Accumulated depreciation (83,908)
---------
Total $ 142,567
=========
Capital Leases
Included in Property, Plant and Equipment, as of September 30, 2006, are
$137,593 of assets that were purchased on capital lease arrangements.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
Statement of Financial Accounting Standard No. 107, Disclosures about fair
value of financial instruments, requires that the Company disclose
estimated fair values of financial instruments. The carrying amounts
reported in the statements of financial position for assets and
liabilities qualifying as financial instruments are a reasonable estimate
of fair value.
Revenue Recognition
Under SOP 97-2 as amended, SOP 81-1 and SAB 104 the Company recognizes
revenue when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, and collectibility is
reasonably assured. In instances where final acceptance of the product,
system, or solution is specified by the customer, revenue is deferred
until all acceptance criteria have been met. . The Company also follows
the provisions of the Securities and Exchange Commission's Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," as revised by SAB 104.
Advertising Costs
The Company expenses all advertising costs as incurred. The advertising
costs were not material for all periods presented.
Software Development Costs
Software development costs required to be capitalized pursuant to
Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,"
have not been material to date. Software development costs for internal
use required to be capitalized pursuant to Statement of Position No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," have also not been material to date. The Company did not
incur any software development costs during the three months ended
September 30, 2006.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred income
taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
Statement of Cash Flows
In accordance with SFAS No. 95, "Statement of Cash Flows," cash flow from
our operations is based upon the local currencies. As a result, amounts
related to assets and liabilities reported on the statement of cash flows
will not necessarily agree with changes in the corresponding balances on
the balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are cash, accounts receivable and other
receivables arising from our normal business activities. We place our cash
in what we believe to be credit-worthy financial institutions. We have a
diversified customer base, most of which are primarily in South East Asia,
the Middle East, Eastern Europe and North America. We control credit risk
related to accounts receivable through credit approvals, credit limits and
monitoring procedures. The Company routinely assesses the financial
strength of its customers and, based upon factors surrounding the credit
risk, establishes an allowance, if required, for uncollectible accounts
and, as a consequence, believes that its accounts receivable credit risk
exposure beyond such allowance is limited.
Segment Reporting
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosure About Segments of an Enterprise and Related Information"
requires use of the "management approach" model for segment reporting. The
management approach model is based on the way a company's management
organizes segments within the company for making operating decisions and
assessing performance. Reportable segments are based on products and
services, geography, legal structure, management structure, or any other
manner in which management disaggregates a company. SFAS 131 has no effect
on the Company's consolidated financial statements as the Company consists
of one reportable business segment as of September 30, 2006.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
New Accounting Pronouncements
In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based
Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No.
123R requires companies to recognize in the statement of operations the
grant- date fair value of stock options and other equity-based
compensation issued to employees. FAS No. 123R is effective beginning in
the Company's second quarter of fiscal 2006. The Company does not expect
the adoption of FAS No. 123R to have a material impact on its consolidated
financial position, results of operations or cash flows.
In May 2005, the FASB issued FASB Statement No. 154, "Accounting Changes
and Error Corrections - a replacement of APB Opinion No. 20 and FASB
Statement No. 3". This statement replaces APB Opinion No. 20, "Accounting
Changes", and FASB Statement No. 3, "Reporting Accounting Changes in
Interim Financial Statements", and changes the requirements for the
accounting for and reporting of a change in accounting principle. This
statement applies to all voluntary changes in accounting principle. It
also applies to changes required by an accounting pronouncement in the
unusual instance that the pronouncement does not include specific
transition provisions. This statement is effective for accounting changes
and correction of errors made in fiscal years beginning after December 15,
2005. Management believes the adoption of this pronouncement will not have
a material effect on our consolidated financial statements.
In June 2005, the FASB ratified the EITF consensus to amend EITF No.
96-16, "Investor's Accounting for an Investee When the Investor Has a
Majority of the Voting Interest but the Minority Shareholders Have Certain
Approval or Veto Rights". The EITF agreed to amend the Protective Rights
section of this consensus, as well as Example of Exhibit 96-16A, to be
consistent with the consensus reached in Issue No. 04-5, "Determining
Whether a General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similarly Entity When the Limited Partners Have
Certain Rights." The provisions of this amendment should be applied
prospectively to new investments and to investment agreements that are
modified after June 29, 2005. Management believes the adoption of this
pronouncement will not have a material effect on our consolidated
financial statements.
In June 2005, the EITF reached consensus on Issue No. 05-6, Determining
the Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF
05-6 provides guidance on determining the amortization period for
leasehold improvements acquired in a business combination or acquired
subsequent to lease inception. The guidance in EITF 05-6 will be applied
prospectively and is effective for periods beginning after June 29, 2005.
EITF 05-6 is not expected to have a material effect on its consolidated
financial position or results of operations.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
Derivative Instruments and Hedging Activities", and SFAF No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". SFAS No. 155, permits fair value
remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation, clarifies
which interest-only strips and principal-only strips are not subject to
the requirements of SFAS No. 133, establishes a requirement to evaluate
interest in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation, clarifies that
concentrations of credit risk in the form of subordination are not
embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
on the qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than
another derivative financial instrument. This statement is effective for
all financial instruments acquired or issued after the beginning of the
Company's first fiscal year that begins after September 15, 2006. The
Company has not evaluated the impact of this pronouncement its financial
statements.
In March 2006 FASB issued SFAS 156 'Accounting for Servicing of Financial
Assets' this Statement amends FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, with respect to the accounting for separately recognized
servicing assets and servicing liabilities. This Statement:
1. Requires an entity to recognize a servicing asset or servicing
liability each time it undertakes an obligation to service a
financial asset by entering into a servicing contract.
2. Requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if practicable.
3. Permits an entity to choose 'Amortization method' or Fair value
measurement method' for each class of separately recognized
servicing assets and servicing liabilities.
4. At its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the
treatment of other available-for-sale securities under Statement
115, provided that the available-for-sale securities are identified
in some manner as offsetting the entity's exposure to changes in
fair value of servicing assets or servicing liabilities that a
servicer elects to subsequently measure at fair value.
5. Requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of
financial position and additional disclosures for all separately
recognized servicing assets and servicing liabilities. An entity
should adopt this Statement as of the beginning of its first fiscal
year that begins after September 15, 2006. Management believes that
this statement will not have a significant impact on the financial
statement.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This
Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This Statement applies under
other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this Statement does not require any new fair value
measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. The management is
currently evaluating the effect of this pronouncement on financial
statements.
In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans--an amendment of FASB
Statements No. 87, 88, 106, and 132(R)' This Statement improves financial
reporting by requiring an employer to recognize the over funded or under
funded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity
or changes in unrestricted net assets of a not-for-profit organization.
This Statement also improves financial reporting by requiring an employer
to measure the funded status of a plan as of the date of its year-end
statement of financial position, with limited exceptions. An employer with
publicly traded equity securities is required to initially recognize the
funded status of a defined benefit postretirement plan and to provide the
required disclosures as of the end of the fiscal year ending after
December 15, 2006. An employer without publicly traded equity securities
is required to recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures as of the end
of the fiscal year ending after June 15, 2007. However, an employer
without publicly traded equity securities is required to disclose the
following information in the notes to financial statements for a fiscal
year ending after December 15, 2006, but before June 16, 2007, unless it
has applied the recognition provisions of this Statement in preparing
those financial statements:
a. A brief description of the provisions of this Statement
b. The date that adoption is required
c. The date the employer plans to adopt the recognition provisions of
this Statement, if earlier.
The requirement to measure plan assets and benefit obligations as of the
date of the employer's fiscal year-end statement of financial position is
effective for fiscal years ending after December 15, 2008. The management
is currently evaluating the effect of this pronouncement on financial
statements.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note C - LOAN RECEIVABLE FROM OFFICER
As of September 30, 2006, loan receivable from an officer amounted to
$2,992,366. This loan is due on demand, interest free, and unsecured.
Note D - PREPAID EXPENSES
As of September 30, 2006, prepaid expenses comprised of the following:
9/30/2006
Advance tax $153,265
Other 14,366
--------
Total $167,631
========
Note E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
As of September 30, 2006, accounts payable and accrued expenses comprised
of the following:
9/30/2006
Accounts payables $144,958
Salary payable 22,049
Other 13,671
--------
Total $180,678
========
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note F - INCOME TAXES
Averox Pakistan is governed by the Income Tax Laws of Pakistan. Pursuant
to the Central Board of Revenue Government of Pakistan, Averox Pakistan is
subject to a tax rate of 35%. Income taxes are recognized for the amount
of taxes payable for the current year and for the impact of deferred tax
liabilities and assets, which represent future tax consequences of events
that have been recognized differently in the financial statements than for
tax purposes.
The following is a breakup of income tax expense:
9/30/2006
Current $592,810
Deferred (4,872)
--------
Total $587,938
========
The primary temporary differences which gave rise to the net deferred tax
asset and liabilities at September 30, 2006, respectively are as follows:
Deferred tax liabilities
Current Portion - Depreciation $ 32,050
========
Deferred tax asset
Current - Allowance for doubtful accounts $125,494
========
The following is a reconciliation of the provision for income taxes at the
Pakistan income tax rate to the income taxes reflected in the Consolidated
Statements of Operations:
September 30,
2006
-------------
Tax expense (credit) at statutory rate-federal 35%
Timing difference (1%)
Tax expense at actual rate 34.2%
=============
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note G - LIABILITIES UNDER FINANCE LEASE
The Company leases certain machinery and equipment under agreements that
are classified as capital leases. The cost of equipment under capital
leases is included in the Balance Sheets as property, plant & equipment.
As of September 30, 2006, the Company had borrowings outstanding in the
aggregate amount of $74,926, related to capital lease obligations. The
rate of interest used ranges from 8% to 18.72% per annum. The amounts of
minimum lease payments and periods during which they become due are as
follows
September 30,
------------
2007 $ 46,896
2008 36,908
------------
Total min. lease payment 83,804
Less amount representing interest (8,878)
------------
Present value of min. lease payments 74,926
Less current maturity of capital lease obligations (41,176)
------------
Long term capital lease obligations $ 33,750
============
Note H- CONTINGENCIES
The Company has filed a suit in the Court of Civil Judge, First Class,
Islamabad against M/s Aircom MEA FZ LLC for declaration, temporary and
permanent prohibitory and mandatory injunction, rendition of accounts, and
recovery of money / damages worth US$ 6,089,000. The management of the
company are of the opinion that the company stands good chances of
recovering some of the claimed amounts and a favorable outcome is expected
in due course of time, However, the precise amount that is likely to be
decreased by the Court cannot be ascertained at this stage. No amount has
been recorded on the books as of September 30, 2006.
The Company has also filed a suit in the Court of Civil Judge, First
Class, Islamabad against M/s ATIS Systems GmbH for declaration, temporary
and permanent prohibitory and mandatory injunction, rendition of accounts,
and recovery of money / damages worth US$ 11,450,000, Euros $644,179 and
Pak Rupees $37,500,000. The management of the company are of the opinion
that the company stands relatively remote chance of getting a favorable
decree on this case. However, ATIS has already admitted a sum of Euros
$10,859 and it is quite likely that the said sum shall be eventually paid
to the company. No amount has been recorded on the books as of September
30, 2006.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note I - OTHER COMPREHENSIVE INCOME
Balances of related after-tax components comprising accumulated other
comprehensive income (loss), included in stockholders' equity, at
September 30, 2006 is as follows:
Accumulated Other
Comprehensive loss
------------------
Balance at June 30, 2006 $ 46,597
Change for the three months 13,864
------------------
Balance at September 30, 2006 $ 60,461
==================
Note J - COMMITTMENTS
The Company leases an office facility under an operating lease that
terminates in June 2007. Rental expense for this lease consisted of
$36,080 for the three months ended September 30, 2006. The Company has
future minimum lease obligations as follows:
2007 $ 27,890
--------
Total $ 27,890
========
Note K - MAJOR CUSTOMERS AND VENDORS
For the three months ended September 30, 2006 we had one customer which
accounted for 89% of our sales. There was $1,766,543 receivable from this
customer as of September 30, 2006. For the three months ended September
30, 2006 we had two vendors which accounted for 35.6 % of our cost of
sales. As of September 30, 2006, there was no amount payable to these
vendors.
Note L - CURRENT VULNERABILITY DUE TO RISK FACTORS
Our operations are carried out in Dubai and Pakistan. Accordingly, our
business, financial condition and results of operations may be influenced
by the political, economic and legal environments, by the general state of
the economy. Our business may be influenced by changes in governmental
policies with respect to laws and regulations, anti-inflationary measures,
currency conversion and remittance abroad, and rates and methods of
taxation, among other things.
AVEROX FZ-LLC AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2006
Note M - DIVIDEND PAYABLE
On September 1, 2006 the Company declared a dividend payable to the
shareholder of Averox Dubai in the amount of $3,022,833.
Note N - SUBSEQUENT EVENT
On November 13, 2006, Averox Dubai and Flickering Star Financial, Inc.
("Flickering") completed the Share Exchange Agreement (the "Agreement")
pursuant to which Flickering will acquire 100% of Averox Dubai in a stock
transaction. Under the terms of the Agreement, Flickering will deliver
6,500,000 unregistered shares of common stock to the Shareholder of Averox
Dubai in exchange for 100% of the issued and outstanding shares of the
company.